The Paper studies a straightforward adverse selection problem in which an informative but imperfect signal on the agent’s type becomes public ex post. The agent is protected by limited liability, which rules out unboundedly high penalties. Analysing the consequences of the additional...

A government agency delegates to a provider (hospital, medical gatekeeper, school, social worker) the decision to supply a service or treatment to individual recipients. The agency does not perfectly know the distribution of individual treatment costs in the population. The single-crossing...

What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information...

Optimal contracts are derived from a simple model where government guarantees two types of private investors participationg in infrastructure projects. With asymmetric information, investors are offered a pair of incentive-compatible contracts covering production, tariff, and guarantee coverage....

This paper presents a static model of adverse selection where the government (principal) aims to minimize the cost of a Poverty Alleviation Program (PAP) ensuring that all agents have access to a minimum level of income. In a two-type-agent model (Rich and Poor) in which agents differ either on...

We investigate the optimal design of a committee in a model with the endogenous participation of experts who have private information about their own abilities. We study three different dimensions of committee design: members' wages, the number of seats, and the communication system. We show...

In this paper we allude to a novel role played by the non-linear income tax system in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. We show that an appropriate choice of the tax schedule enables the government to affect the wage...

In this paper we allude to a novel role played by the non-linear income tax system in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. We show that an appropriate choice of the tax schedule enables the government to affect the wage...

Popular opinion suggests that malfunctioning, poorly designed incentive schemes in financial firms that encouraged greed and involved excessive salaries were responsible for the excessive risk taking that eventually led to the 2008 financial crash. In this paper we discuss this claim in a...

Asymmetric information can lead to adverse selection and market failure. In a dynamic setting, asymmetric information also limits reclassification risk. This certainty offsets the costs of adverse selection. Using a dynamic model of endogenous insurance choice and price calibrated to the U.S....